Feb 25 2010
Sunrise Senior Living, Inc. (NYSE: SRZ) today reported financial results and operating data for the fourth quarter and full year of 2009. Sunrise will host a conference call and webcast Thursday, February 25, 2010, at 9:00 a.m. ET, to discuss the financial results.
"We have made significant financial restructuring progress and, as promised, our attention is focused on our communities, team and residents," said Mark Ordan, Sunrise's chief executive officer. "While we are the highest-end major senior living company in a difficult economy, we are excited by our strong operating focus and believe this will lead to an improved bottom line."
Financial Results for Fourth Quarter and Full Year 2009
Sunrise reported revenues of $364.3 million and $1.5 billion for the fourth quarter and twelve months ended December 31, 2009, respectively, as compared to $398.4 million and $1.6 billion for the for the fourth quarter and twelve months ended December 31, 2008. Net income (loss) for the fourth quarter and twelve months ended December 31, 2009, was $10.4 million and ($133.9) million, or $0.19 and ($2.61) per fully diluted share, respectively, as compared to net loss of ($305.6) million and ($439.2) million, or ($6.07) and ($8.72) per fully diluted share, for the fourth quarter and twelve months ended December 31, 2008, respectively. The loss before income taxes and discontinued operations for the fourth quarter and twelve months ended December 31, 2009, was ($32.3) million and ($117.1) million, respectively, as compared to loss before income taxes and discontinued operations of ($235.3) million and ($373.7) million for the fourth quarter and twelve months ended December 31, 2008, respectively. During the fourth quarter of 2009, Sunrise recognized a gain of $48.9 million from the sale of 21 communities, which is included in discontinued operations. During the fourth quarter of 2008, Sunrise recorded an impairment charge of $121.8 million related to all of the goodwill for its North American business segment. Sunrise also determined that a valuation allowance on the net deferred tax assets was required.
For the twelve months ended 2009, net loss from operations was ($132.0) million, an improvement of $215.6 million as compared to a net loss from operations of ($347.6) million in the twelve months ended 2008. Adding back non-cash charges including depreciation and amortization of $46.6 million, write-off of capitalized project costs of $14.9 million, provision for doubtful accounts of $13.6 million, stock compensation of $3.0 million and impairment of long-lived assets of $31.7 million, as well as non-recurring items including the SEC investigation costs of $3.9 million and restructuring costs of $33.3 million, the adjusted income from ongoing operations was $15.0 million. Adjusted income (loss) from ongoing operations is a measure of operating performance that is not calculated in accordance with U.S. GAAP and should not be considered as a substitute for income or loss from operations or net income or loss. Adjusted income from ongoing operations is used by management to focus on income generated from the ongoing operations of the Company and to help management assess if adjustments to current spending decisions are needed. For a reconciliation of these items, please refer to the attached table "Adjusted Income (Loss) from Ongoing Operations."
Revenues and loss before income taxes and discontinued operations previously reported for 2008 have been reclassified to conform to the current year presentation. The amounts were reclassified to include the results of our German communities, our former Greystone subsidiary, 22 communities, which were sold in 2009, and one community, which was closed in 2009, in discontinued operations.
Cash and Liquidity Update
Sunrise had $39.3 million of unrestricted cash at December 31, 2009. Sunrise has no borrowing availability under its bank credit facility, and has significant scheduled debt maturities in 2010 and significant debt that is in default. As of December 31, 2009, Sunrise had debt of $440.2 million, of which $227.2 million of debt is scheduled to mature in 2010, including $33.7 million under its bank credit facility, which is due in December 2010. Debt that is in default totals $317.2 million, including $198.7 million of debt ($215.2 million face) that is in default as a result of the failure to pay principal and interest to the lenders of Sunrise's German communities. Sunrise is seeking waivers with respect to existing defaults to avoid acceleration of these obligations.
On February 12, 2010, Sunrise extended $56.9 million of debt that was either past due or in default at December 31, 2009. The debt is associated with an operating community and two land parcels. In connection with the extension, Sunrise (i) made a $5.0 million principal payment at closing, (ii) extended the terms of the debt to no earlier than December 2, 2010, (iii) provided for an additional $5.0 principal payment on or before July 31, 2010, and, among other items, (iv) defaults under the loan agreements were waived by the lenders.
Significant 2009 and 2010 Developments
During 2009, Sunrise executed on a plan to reduce overhead costs, restructure and extend maturities of some of its debt, and sell assets to generate liquidity. Steps taken to date as part of this plan include:
- Selling 21 wholly owned senior living communities for an aggregate purchase price of $204 million, generating at closing approximately $60 million in net proceeds for Sunrise;
- Entering into an agreement with its Fountains portfolio venture partner and the lender to release Sunrise from all claims that the venture partner and lender had against Sunrise and, in exchange, Sunrise has transferred its 20-percent ownership interest in the venture, as well as contributed certain vacant land parcels, agreed to transfer from management of the 16 Fountains communities, and repaid the venture the $1.8 million management fee Sunrise earned in 2009. To date, Sunrise has transferred from management in eight of the 16 communities;
- Entering into a restructuring agreement with the lenders to seven of the nine communities in Germany, to settle and compromise their claims against Sunrise. In exchange, Sunrise has issued to the participating lenders 4.2 million shares of common stock, their pro rata share of up to 5 million shares of common stock, has agreed to grant them the mortgages on certain unencumbered North American properties as part of a liquidating trust, and has guaranteed to these participating lenders a minimum of $58.3 million in net proceeds. Sunrise has also agreed to market for sale the German assisted living communities. At December 31, 2009, Sunrise continues to be liable under operating deficit and repayment guarantees for two communities, and a principal repayment guarantee for the Hoesel land parcel, which is not part of the restructuring agreement. The Hoesel land parcel was sold and the liability was released in early 2010;
- Selling its Greystone subsidiary and its interests in Greystone seed capital partnerships for $2.0 million in cash at closing; $5.7 million in short-term notes, which have subsequently been repaid; a $6.0 million, 7-year note; a $2.5 million note payable; and 35-percent of the future net proceeds received by the seed capital investors for each of the seed capital interests purchased from Sunrise. In 2009, Sunrise received $1.0 million in net proceeds for one of its seed capital interests.
- Selling its equity interest in its Aston Gardens venture (generating net proceeds for Sunrise of approximately $4.8 million), and in exchange releasing Sunrise from all guarantee obligations and terminating Sunrise's six management contracts in the venture as of April 30, 2009;
- Reducing corporate expenses through reorganization of its corporate cost structure to an annual recurring run rate of approximately $100 million.
Additional details on these steps have been included in Sunrise's 2009 Form 10-K filed today.
Sunrise's focus in 2010 will be on: (1) operating high-quality assisted living and memory care communities in North America, Germany and the United Kingdom; (2) increasing occupancy and improving the operating efficiency of Sunrise's communities; (3) improving the operating efficiency of Sunrise's corporate operations; (4) generating liquidity; (5) divesting of non-core assets; and (6) reducing operational and financial risk.
Operating Data for Fourth-Quarter 2009
The nine German communities have been excluded from Sunrise's 2009 fourth quarter operating results set forth below because they are considered discontinued operations.
- Comparable community revenues for the fourth quarter of 2009 decreased by 1.6 percent, from $525.5 million for the fourth quarter of 2008 to $517.0 million for the fourth quarter of 2009. Excluding the impact of foreign exchange rates in 2009, comparable community revenues for the fourth quarter of 2009 decreased 2.3 percent to $513.3 million year over year. Sunrise's comparable community portfolio consists of communities that were open and operating as of January 1, 2007, and include consolidated, unconsolidated venture, and managed communities in the United States, Canada and the United Kingdom.
- Average unit occupancy in comparable communities for the fourth quarter of 2009 was 86.5 percent, which was down 350 basis points from 90.0 percent for the fourth quarter of 2008, and down 10 basis points as compared to 86.6 percent in the third quarter of 2009.
- Average daily revenue per occupied unit in comparable communities increased 2.5 percent from $185.85 for the fourth quarter of 2008 to $190.56 for the fourth quarter of 2009. Excluding the impact of foreign exchange rates in 2009, average daily revenue per occupied unit for the comparable community portfolio increased 1.8 percent to $189.22 for the fourth quarter of 2009 as compared to the fourth quarter of 2008.
- Comparable community operating expenses for the fourth quarter of 2009 decreased 3.9 percent over the fourth quarter of 2008 from $398.5 million to $383.1 million. Excluding certain health and dental expenses experienced in the fourth quarter of 2008, as well as the impact of the foreign exchange rates in 2009, these operating expenses decreased 4.8 percent.
- As the Company has announced, Sunrise will discontinue managing the Fountains portfolio in the coming months. To date, Sunrise has transferred from management in eight of the 16 communities. Excluding these 16 communities' operating performance, fourth-quarter 2009 comparable community revenues were $477.0 million, average unit occupancy was 87.2 percent, average daily revenue per occupied unit was $196.98, and community operating expenses were $351.0 million. A table providing additional detail on Sunrise's operating results excluding this portfolio has been attached.
- In the fourth quarter of 2009, Sunrise opened five new communities, with a combined capacity of 403 units. As of December 31, 2009, Sunrise did not have any additional communities under construction.
- As of December 31, 2009, Sunrise operated 384 communities located in the United States, Canada, the United Kingdom and Germany, with a unit capacity of approximately 40,400 units.
- As of February 25, 2010, Sunrise operated 374 communities located in the United States, Canada, the United Kingdom and Germany, with a unit capacity of approximately 37,800 units.
Sunrise's management believes that total comparable-community revenues, average daily revenue per occupied unit, average unit occupancy rates and total comparable-community expenses are useful indicators of trends in Sunrise's management business. For additional details on Sunrise's comparable-community operations data, please refer to the Supplemental Information attached. SOURCE Sunrise Senior Living, Inc.